The latest on Making Tax Digital

Jan 14, 2019

In October HMRC opened the Making Tax Digital for VAT pilot and at the same time announced a six month deferral until 1 October 2019 for some taxpayers with more complex requirements.

Letters to those meeting deferral criteria

HMRC has since undertaken a detailed exercise to identify all taxpayers that fall within this group and began issuing letters before Christmas to those affected. A copy of the letter is reproduced below for information.

The letter is a specific:

  • direction under Regulation 25A SI 1995/2518 to continue using existing methods to file VAT returns for all periods starting before 1 October 2019 (unless you choose to join Making Tax Digital for VAT before then)
  • notification of exemption under Regulation 32B SI 2018/261 from the requirement to keep an electronic account (digital VAT records) 

Any taxpayer that has a taxable turnover of, or above, the UK registration VAT threshold (currently £85,000) and does not receive this letter must report for VAT purposes under Making Tax Digital for VAT from 1 April 2019. The letter reads as follows:- 

“ Letter to customers

The date you need to start using Making Tax Digital

[Entity Name: VAT Registration Number]

We are changing how businesses need to keep their VAT records and submit their VAT returns. This new service is known as Making Tax Digital.

From 1 April 2019 all VAT registered businesses must use the service if they have a taxable turnover of, or above, the UK registration VAT threshold (currently £85,000). Taxable turnover is the total value of everything you sell that is not exempt from VAT.

Our records show that this would normally apply to you. However, you are part of a small number of customers who do not have to start using Making Tax Digital from 1 April 2019.

You will need to start using the service for your first VAT return for the period starting on or after 1 October 2019. After that date you will need to keep digital records and submit VAT returns using software that works with Making Tax Digital.

Making Tax Digital pilot

We estimate that our pilot for most VAT customers like you will start in early 2019. You will not be able to join the pilot until then. We will write to you again with details of how to join.

Please tell your representative (if you have one) about this start date.

Until your business joins Making Tax Digital for VAT, you should continue to keep records and file VAT returns in the same way as you do now. For example, some businesses use the HMRC online portal.

For more information about:

· how Making Tax Digital will work, go to www.gov.uk/government/publications/making-tax-digital

· the relevant VAT Notice for Making Tax Digital for VAT, go to www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat

This letter is a specific:

· direction under Regulation 25A SI 1995/2518 to continue using existing methods to file VAT returns for all periods starting before 1 October 2019 (unless you choose to join Making Tax Digital for VAT before then)

· notification of exemption under Regulation 32B SI 2018/261 from the requirement to keep an electronic account (digital VAT records)” 


MTD updates for agents

HMRC recently began publishing MTD updates specifically for agents. Updates 1 and 2 are now available.

Update on pilot

Following successful completion of testing, partnerships are now able to voluntarily join the MTD VAT service and begin to test the service ahead of its introduction. HMRC has also updated guidance to reflect the fact that Flat Rate Scheme users can also now join the pilot.

Private testing with other taxpayer types continues and HMRC says it is currently on track to open the pilot up early in the New Year to the remainder of those who will be mandated to join the service from April. At that point, the pilot programme for MTD for VAT will be open to all businesses that meet the requirements.